Benefit fraud tops $23m in record year

Colin Diedrichs stole $447,514 but the ministry was able to claw back only $357,000, with the help of the police asset recovery unit. Photo / File

Identity fraudsters "systematically and methodically" stole more than $500,000 in benefit scams before being caught last year.

Forged medical records and birth certificates, including those with details stolen from dead children, were uncovered by investigators in a record year for benefit fraud which cost taxpayers $23.4 million.

Four people were jailed for identity theft frauds including Colin Diedrichs - who pretended to be two young boys who died decades ago - to claim extra superannuation payments over more than 20 years.

"Cases of identity fraud are rare and any person who commits it, does so not through opportunity but by systematically and methodically planning their offence," said Iona Holsted, deputy chief executive of the Ministry of Social Development.

Diedrichs stole $447,514 but the ministry was able to claw back only $357,000, with the help of the police asset recovery unit, under the Criminal (Proceeds) Recovery Act.

The four identity frauds prosecuted in 2011-12 were picked up by data-matching software introduced in March 2007, after the discovery of the biggest benefit fraudster in New Zealand history. Wayne Patterson used 123 fake identities to steal $3.4 million over two years - or $56,000 a fortnight - before he was caught in 2006 and jailed for eight years.

This was followed by a 2008 Auditor-General's report which said the ministry should improve the way it prevented, detected and investigated benefit fraud.

An intelligence unit was launched and data-matching is now conducted with other Government agencies including Inland Revenue, Internal Affairs, Housing New Zealand, Corrections, ACC and Customs.

Figures released to the Herald under the Official Information Act show fraud detected by the ministry has tripled from $7.5 million since those changes have been made.

Benefit fraud discovered last year cost taxpayers a record $23.4 million, with 742 prosecutions. Among those were seven ministry staff sacked and charged with taking $64,187.

But those caught cheating the system make repayments as little as $10 a week. The total amount of debt owed is $106 million.

The most common type of benefit fraud is failing to declare income and people who claim a single benefit while in a relationship.

Last week, Associate Social Development Chester Borrows outlined a range of measures to clamp down on welfare fraud, including a law change to allow the prosecution of the partners of welfare fraudsters who know about the fraud or benefit from it.

Other measures included more checking of beneficiaries who have been dishonest with Work and Income previously, including restricting their use of self-service online services.